Glossary - Bonds - Letters - A - Quotes - Charts

| A | . .1MTX Glossary: BONDS... BONDS Glossary . Accreted Value Zero Coupon Bonds are issued at a discount and mature at Par (USD1,000). The value of the bond increases mathematically by a slight amount every day during the life of the bond. The mathematical value of the bond on a given day is its accreted value (or accumulated value to date). Note that the accreted value may be higher or lower than the market value of the bond. acceleration A contract term providing for the principal amount of and any accrued interest on an obligation to become due and payable prior to the originally scheduled due date upon occurrence of a contractually stipulated event (typically, certain specified events of default). Accretion Accretion is the change in the price of a bond bought at a discount to the par value of the bond. accretion bond Often the last tranche in a CMO (Collateralized Mortgage Obligation), the accretion bond, or Z-tranche, receives no cash payments for an extended period of time until the previous tranches are retired. While the other tranches are outstanding, the Z-tranche receives credit for periodic interest payments that increase its face value but are not paid out. When the other tranches are retired, the Z-tranche begins to receive cash payments that include both principal and continuing interest. Accretion of Discount An accounting process by which the book value of a security purchased at a discount from par is increased during the security’s holding period. The accretion reflects the increase in the security’s value as it approaches the redemption or maturity date. Under a "straight line" accretion method, the amount of the yearly accretion is the same for all years and is equal to the product of the total amount of the discount divided by the number of years to redemption. Under a "constant interest" accretion method, the amount of the yearly accretion increases as the redemption date approaches and for any semi-annual period is equal to (a) the original semi-annual yield to maturity multiplied by the current book value less (b) the current interest payment. accrual bonds Accrual bonds are fixed-interest bonds issued at their face value and repaid at the end of the maturity period together with the accrued interest. Often the last tranche in a CMO (Collateralized Mortgage Obligation), the accrual bond or Z-tranche receives no cash payments for an extended period of time until the previous tranches are retired. While the other tranches are outstanding, the Z-tranche receives credit for periodic interest payments that increase its face value but are not paid out. When the other tranches are retired, the Z-tranche begins to receive cash payments that include both principal and continuing interest. Accrued Interest Accrued interest is the interest that has accumulated since the principal investment, or since the previous interest payment if there has been one already. For a financial instrument such as a bond, interest is calculated and paid in set intervals. When a bond trades, the buyer pays the seller the accrued interest - a pro rata portion of the next interest payment, which will be paid to the buyer of the bond. »...Formula active tranche A CMO (Collateralized Mortgage Obligation) tranche that is currently paying principal payments to investors. ad valorem tax An ad-valorem tax (Latin: by value) is a tax based on the value of real estate or personal property. Ad-valorem taxes can be property taxes or even duty on imported items. Property ad-valorem taxes are the major source of revenues for state and municipal governments. »...more additional Bonds An issue of bonds having a lien on the revenues or other security pledged to outstanding bondsissued under the same bond contract. Additional bonds typically are issued on a parity with the outstanding bonds, although in some cases additional bonds can have either a junior lien or a senior lien on pledged revenues or other security. additional Bonds Covenant Additional bonds covenant (or test) is a financial test, sometimes referred to as a "parity test," that must be satisfied under the bond contract securing outstanding revenue bonds as a condition to issuing additional bonds. Typically, the test would require that historical revenues (plus, in some cases, future estimated revenues) exceed projected debt service requirements for both the outstanding issue and the proposed issue by a certain ratio. adjustable-rate mortgage (ARM) An adjustable rate mortgage (ARM), variable rate mortgage or floating rate mortgage is a mortgage loan where the interest rate on the note is periodically adjusted based on an index. This is done to ensure a steady margin for the lender, whose own cost of funding will usually be related to the index. Consequently, payments made by the borrower may change over time with the changing interest rate. »...more advance refunding A financing structure under which new bonds are issued to repay an outstanding bond issue prior to its first call date. Generally, the proceeds of the new issue are invested in government securities, which are placed in escrow. The interest and principal repayments on these securities are then used to repay the old issue, usually on the first call date. There are several methods of advance refunding or achieving the same practical effect as an advance refunding: Crossover Refunding – A method of advance refunding in which the revenue stream originally pledged to secure the refunded bonds continues to be used to pay debt service on the refunded bonds until they mature or are called. At that time the pledged revenues "cross over" to pay debt service on the refunding bonds and escrowed securities are used to pay the refunded bonds. During the period when both the refunded and the refunding bonds are outstanding, debt service on the refunding bonds is paid from interest earnings on the invested proceeds of the refunding bonds. Forward Refunding – An agreement, usually between an issuer and the underwriter, whereby the issuer agrees to issue bonds on a specified future date and an underwriter agrees to purchase such bonds on such date. The proceeds of such bonds, when issued, will be used to refund the issuer’s outstanding bonds. Typically, a forward refunding is used where the bonds to be refunded are not permitted to be advance refunded on a tax-exempt basis under the Internal Revenue Code. In such a case, the issuer agrees to issue, and the underwriter agrees to purchase, the new issue of bonds on a future date that would effect a current refunding. Full Cash or Gross Refunding – A method of advance refunding in which the proceeds of refunding bonds, without reinvestment, will provide sufficient funds to pay debt service on the refunded bonds. Such a refunding issue generally consists of two series of bonds: the refunding bonds, which pay debt service on the refunded bonds; and “special obligation bonds,” which pay a portion of the debt service on the refunding bonds. The special obligation bonds are paid from the interest earnings on the invested refunding bond proceeds. Thus, even though a larger total amount of principal may be outstanding as a result of this type of refunding, the issuer’s total annual debt service requirements may be reduced because the debt service on the special obligation bonds is paid from the earnings on the series of refunding bonds. Net Cash Refunding – A method of advance refunding in which the proceeds of refunding bonds and any other available moneys, together with interest earnings thereon, will produce sufficient funds to pay debt service on the refunded bonds. Synthetic Refunding – An agreement between an issuer and a counter-party entered into in connection with outstanding bonds that the issuer is not permitted to advance refund on a tax-exempt basis under the Internal Revenue Code. The agreement is designed to generate debt service savings that the issuer would realize if it were permitted to advance refund the outstanding bonds. Such agreements generally provide for a payment from the counter-party to the issuer upon execution in return for a specified action of the issuer or a right to take a specified action by the counter-party at a future date, typically a date on which the issuer can call the outstanding bonds and effect a current refunding. For example, on the call date, the counter-party may have the right to require the issuer to issue refunding bonds with certain specified terms for purchase by the counter-party. Alternatively, the issuer may issue variable rate refunding bonds and have the right to require the counter-party to enter into an interest rate swap on specified terms. Agencies A colloquial term for securities issued by a U.S. federal agency or certain federally chartered entities (often referred to as Government-Sponsored Enterprises = GSEs). Agency securities typically are not guaranteed by the federal government, particularly those of GSEs. Agency securities also are generally exempt from the registration and prospectus requirements of the Securities Act of 1933. Securities of the following entities, among others, generally are considered agency securities: Federal Agricultural Mortgage Corporation (Farmer Mac), Federal Farm Credit Banks Funding Corporation (FFCB or Farm Credit), Federal Home Loan Bank System (FHLB or Home Loan), Federal Home Loan Mortgage Corporation (FHLMC or Freddie Mac), Federal Housing Administration (FHA), Federal National Mortgage Association (FNMA or Fannie Mae), Government National Mortgage Association (GNMA or Ginnie Mae), Student Loan Marketing Association (SLMA or Sallie Mae), and Tennessee Valley Authority (TVA). Agency Bonds Agency debt (sometimes referred to in plural as Agencies) is a type of bond issued by a corporation that is nominally independent of the government - though ownership may be public or private - but considered to be backed by the government, usually on a de facto basis. The most common issuers in the United States are the Federal National Mortgage Association (FNMA or "Fannie Mae") and the Federal Home Loan Mortgage Corporation (FHLMC or "Freddie Mac"), which are both heavily involved in the Mortgage-backed securities market and the Federal Home Loan Banks (FHLBanks) which issue significant amounts of debt [that are the joint and several liability of all 12 FHLBanks] to support the FHLBank mission of extending advances [secured loans] to it members [primarily the nations community banks]. agency transaction A sale and purchase of bonds in which the dealer places bonds with the buyer on a commission basis rather than selling bonds that the dealer owns. Agreement Among Underwriters (AAU) Legal document used principally in negotiated sales by underwriters. The document consists of the instructions, terms and acceptances, and the standard terms and conditions. All in Cost (AIC) (1) A measurement of the total cost of a bond financing, expressed as a discount rate calculated using the present value of all debt service payments on the issue and the total proceeds of the issue. For purposes of this calculation, the amount of proceeds is adjusted by any accrued interest, original issue discount, original issue premium and costs of the financing (e.g., costs of issuance, credit enhancement fees, underwriter’s spread, etc.). (2) For a variable rate demand obligation issue, the measure of costs expressed as a percentage that includes the cost of the liquidity facility, remarketing fees, interest payments and administrative fees. all or none (AON) Where the offeror of a block of bonds will only sell all of the available bonds and not only a portion of them. Allocation (1) The process of setting bonds apart for the purpose of distribution to syndicate members. This term is often used interchangeably with the term "allotment". (2) Where an advisor or other professional is purchasing securities for more than one of its customers, the amount of the securities deposited to or otherwise held for the account of each such customer. allotment An allotment is a method of distributing securities to investors when an issue has been oversubscribed. At the end of the subscription period, the demand for a new issue can exceed the number of shares or bonds being issued. In such cases, the underwriting bank allots the securities with the approval of the issuer, either by lottery or on the basis of a formula. An allotment formula usually takes into account the issuer's preferred target investor groups. Alternative Minimum Tax (AMT) In addition to calculating regular income tax, taxpayers are also required to calculate tax liability using the AMT method. The taxpayer then pays the higher of the tax calculated by the two methods. Some municipal bonds are subject to AMT, meaning that if you pay AMT, the interest earned on these bonds is taxable under the AMT calculation. Other municipal bonds are not subject to AMT, meaning that even if you pay taxes using the AMT method, interest from non-AMT municipals will not be taxable. Please consult your tax advisor for complete details, and how you might be affected by buying municipal bonds that are subject to AMT. »...more amortization Liquidation of a debt through installment payments. Payments are divided into equal amounts for the duration of the loan, making it the simplest repayment model. A greater amount of the payment is applied to interest at the beginning of the amortization schedule, while more money is applied to principal at the end. »...more AMT Bonds Tax-exempt bonds, interest on which is subject to the Alternative Minimum Tax (AMT). arbitrage In economics, arbitrage is the practice of taking advantage of a price differential between two or more markets: a combination of matching deals are struck that capitalize upon the imbalance, the profit being the difference between the market prices. In the municipal market, the difference in interest earned on funds borrowed at a lower tax-exempt rate and interest on funds that are invested at a higher-yielding taxable rate. Under the 1986 Tax Act, with very few exceptions, arbitrage earnings must be rebated back to the federal government. arbitrage Bonds Bonds initially issued on a tax-exempt basis that are formally deemed by the Internal Revenue Service to violate federal arbitrage regulations. If the Internal Revenue Service finds that bonds are "arbitrage bonds", the interest becomes taxable and therefore is included in each bondholder’s gross income for federal income tax purposes. arbitrage certificate Transcript certificate evidencing compliance with the limitations on arbitrage imposed by the Internal Revenue Code (IRC) and the applicable regulations. ARM (Adjustable Rate Mortgage) An adjustable rate mortgage (ARM), variable rate mortgage or floating rate mortgage is a mortgage loan where the interest rate on the note is periodically adjusted based on an index. This is done to ensure a steady margin for the lender, whose own cost of funding will usually be related to the index. Consequently, payments made by the borrower may change over time with the changing interest rate. »...more ascending (or positive) yield curve The interest rate structure which exists when long-term interest rates exceed short-term interest rates. ask price Price being sought for the security by the seller. Also called the offer. Lowest price any seller is willing to accept for a security at a given time. ask yield The return an investor would receive on a Treasury security if he or she paid the ask price. assessed valuation The value of property against which an ad valorem tax is levied, usually a percentage of "true" or "market" value. auction Sealed-bid public sale of Treasury securities; method of determining the rate or yield auction rate bonds Floating-rate tax-exempt bonds where the rate is periodically reset by a dutch auction. authority A unit or agency of government, or a separately established not-for-profit entity formed on behalf of a governmental entity, established to perform specialized functions. In some cases, authorities have the power to issue debt that is secured by the lease rental payments made by a governmental unit using the facilities constructed with bond proceeds. In other cases, authorities issue private activity bonds for the purpose of making the proceeds available to qualified private entities for use as permitted under the federal tax laws. Examples of such conduit authorities include health facilities authorities, industrial development authorities and housing finance authorities. An authority may function independently of other governmental units, or it may depend upon other units for its creation, funding or administrative oversight. Authorities, other than conduit authorities, usually are financed by service charges, fees or tolls, although they also may have taxing powers. Conduit authorities generally are financed by fees payable by conduit borrowers, either paid directly by the borrower or under the bond contract. authorizing resolution Issuer document which states the legal basis for debt issuance, and states the general terms of the financing. Adoption of an authorizing resolution by the issuer’s governing body is a condition precedent to the issuance of the proposed securities. Typically, an issuer will be required to adopt a final "award" or "sale" resolution setting forth the specific terms of the offering. average life On a mortgage security, the average time to receipt of each dollar of principal, weighted by the amount of each principal prepayment, based on prepayment assumptions. The average life, also referred to as the "weighted average life" or "weighted average maturity", is a reflection of the rapidity with which the principal of an issue is expected to be paid. Under one commonly used calculation method, average life is equal to the total bond years divided by the total number of bonds (one bond equals $1,000 par amount, regardless of actual denomination). Note that this computation method does not take into account the time value of the principal amounts. award The official acceptance by the issuer of a bid or offer to purchase a new issue of municipal securities by an underwriter. The date of the award is generally considered the "sale date" of an issue. . . ADVERTISEMENT ^ top Sources: Yahoo.com; investinginbonds.com; MSRB.org; SEC.gov; Wikipedia.org; Others; .1MTX 2007 | A | . .1MTX Glossary: BONDS - List Corporate Bonds - International BONDS International Corporate Bonds . Country Issuer Sweden AB Electrolux more Sweden AB Volvo more Switzerland ABB International Finance Ltd more Switzerland ABB Ltd more USA Abbott Laboratories more Spain Abertis Infraestructuras, S.A. more Canada Abitibi Consolidated Inc. more France Accor SA more India Ace Refractories Limited more Italy Acea SpA more Taiwan Acer Inc. more Argentina Acindar Indst Argentina (Acindar) more India Adhunik Metaliks Limited more India Aditya Birla Nuvo Ltd more Thailand Advanced Info Servic Publ.Co.Ltd. more USA Advanced Micro Devices, Inc. more Japan Aeon Co., Ltd more USA Aerial Communications, Inc. more France Aeroports de Paris S.A. (ADP) more USA Affiliated Computer Services Inc. more U.K. Aggregate Industries plc more USA Agilent Technologies, Inc. more Bolivia Aguas del Illimani S.A. more Chile AGUAS NUEVO SUR MAULE S.A. more France Air Liquide more Hong Kong Airport Authority Hong Kong more Z.A. Airports Company South Africa Ltd. more Sri Lanka Aitken Spence & Company Limited more Norway Aker Kvaerner ASA more India Aksh Optifibre Limited more Netherlands Akzo Nobel N.V. more USA Alameda Power & Telecom more USA Alamosa Delaware Inc. more USA Alberto-Culver Co. more USA, CA Alcan, Inc. more France Alcatel-Lucent more Brazil Alcoa Aluminio S.A. more USA Alcoa, Inc. more USA Alcon Inc more Mexico Alestra, S. de R.L. de C.V. more Japan All Nippon Airways Co. Ltd. (ANA) more USA Allergan, Inc. more U.K. Alliance Boots plc more USA Allied Waste Industries, Inc. more USA Allied Waste North America more USA Alltel Corporation more USA Alltel Ohio Ltd. Partnership more India Alok Industries Limited more Argentina Alpargatas S.A.I.C. more Spain Altadis SA more Argentina Alto Palermo S.A. more KY Altria Finance(Cayman Islands) Ltd. more USA Altria Group, Inc. more China Aluminium Corporation of China Ltd. more Panama Amanco Holding Inc. (Amanco) more USA AMC Entertainment Inc. more Brazil America Latina Logistica S.A. (ALL) more Mexico America Movil S.A. de C.V. more USA American Airlines, Inc. more USA American Axle&Manufacturing Hold, Inc. more USA American Cellular Corp. more USA American Honda Finance Corp. more USA American Tower Corp. more USA American Towers Inc. more USA Americas Mining Corporation (AMC) more USA AmerisourceBergen Corp. more USA Ameritech Capital Funding Corp. more USA Ametek, Inc. more Bolivia Ametex S.A. more USA AMR Corporation more India Amrutanjan Ltd. more USA Anadarko Petroleum Corp. more Turkey Anadolu Efes Biracilik ve Malt Sanayii A.S. more India Andrew Yule & Company Ltd more China Angang New Steel Co. Ltd more U.K. Anglian Water Services Financing Plc more U.K. Anglo American Capital PLC more U.K. Anglo American PLC more Z.A. AngloGold Ashanti Limited more USA Anheuser-Busch Companies, Inc. more USA Anixter Inc. more USA Anixter International Inc. more Chile Antarchile S.A. more Kazakhstan AO Kazakhtelecom more Ireland AOL Time Warner Finance Ireland more USA Apache Corporation more Brazil Aracruz Celulose S.A. more USA ARAMARK Corporation more USA ARAMARK Services, Inc. more Turkey Arcelik more India Arch Pharmalabs Limited more USA Archer Daniels Midland more Italy Ariosto S.r.l more USA Arkansas Electric Cooperative Corp. more Thailand Aromatics Public Company Limited more USA Arrow Electronics, Inc. more Argentina Arte Grafico Editorial Argentino more U.K. Artesian Finance II Plc more U.K. Artesian Finance plc more India Arvind Mills Limited more USA ArvinMeritor Inc. more Japan Asahi Breweries, Ltd. more USA Ashmore Energy International Ltd. more India Ashok Leyland Ltd. more Thailand Asian Property Development Public Co.Ltd. more Netherlands ASML Holding N.V. more USA Asotin County Public Utility District No.1 more India Associated Cement Companies Ltd. more Sri Lanka Associated Motorways Ltd more U.K. AstraZeneca PLC more USA AT&T Corp. more USA AT&T Inc. more USA AT&T Wireless Services, Inc. more Brazil Atmosfera Gestao e Higienizaçao de TexteisLtda. more Taiwan AU Optronics Corporation more USA AutoNation, Inc. more KY Autopistas del Nordeste Limited more Z.A. Aveng Limited more USA Avis Budget Car Rental, LLC more USA Avnet, Inc. more USA Avon Capital Corp. more USA Avon Products, Inc. more . Glossary Glossary ADVERTISEMENT ^ top .1MTX 2007